intro to accounting chapter 5
cost of goods sold is determined only at the end of the accounting period in
a periodic inventory system
paden company purchased merchandise from emmet company with freight terms of FOB shipping point. the freight costs will be paid by the
buyer
a perpetual inventory system would likely be used by each of the following except a. candy store. b. hardware store. c. grocery store. d. automobile dealership
c. grocery store.
financial analysts emphasize operating income over other non-operating activities because it's
considered sustainable
two categories of expenses for merchandising companies are
cost of goods sold and operating expenses
Which of the following expressions is incorrect? a. Gross profit - operating expenses = net income b. Sales revenue - cost of goods sold - operating expenses = net income c. Net income + operating expenses = gross profit d. Operating expenses - cost of goods sold = gross profit
d. Operating expenses - cost of goods sold = gross profit
sales revenue less cost of goods sold is called
gross profit
net sales-cogs
gross profit=
sales - cogs
gross profit=
freight costs paid by a seller on merchandise sold to customers will cause an increase
in operating expenses for the seller
a buyer would record a payment within the discount period under a perpetual inventory system by crediting
inventory
in a perpetual system, the amount of discount allowed for paying for merchandise purchased within the discount period is credited to
inventory
the journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit
inventory
under the perpetual system, cash costs incurred by the buyer for the transporting of goods are recorded in
inventory
under a perpetual inventory system, acquisition of merchandise for resale is debited to the
inventory account
if a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
inventory account will be increased
the freight cost incurred by the seller on outgoing merchandise
is an operating expense
after gross profit is calculated, operating expenses are deducted to determine
net income
gross profit-operating expenses
net income=
Income from operations is gross profit less
operating expenses
Gross profit will result if
operating expenses are less than net income
if a company is given terms of 2/10, n/30 it should
pay within the discount period and recognize a savings
the inventory account is used in each of the following except the entry to record a. goods purchased on account. b. the return of goods purchased. c. payment of freight on goods sold. d. payment within the discount period
payment of freight on goods sold
a physical count is required at the end of the year in
periodic
detailed records of goods held for resale are not maintained under a
periodic inventory system
this inventory system requires more detailed inventory records
perpetual
Crain Department Store uses a perpetual inventory system. At year-end, the balance in the Merchandise inventory account is $1,500,000. Assuming that the inventory records have been maintained properly, a year-end physical inventory
probably will indicate less than $1,500,000 in merchandise on hand.
a perpetual inventory system, inventory is credited when a
purchase discount is taken
a merchandising company that sells directly to customers is a
retailer
an enterprise which sells goods to customers is known as a
retailer
under the perpetual inventory system in a merchandising company, account that must be closed include
sales returns & allowances
What type of firm would not be considered a merchandising company?
service firm
single step income statement arrives at the net income by
subtracting total expenses from all revenues
the primary source of revenue for a wholesaler is
the sale of merchandise
if a company determines cost of goods sold each time a sale occurs, it
uses a perpetual inventory system
in a perpetual inventory system, cost of goods sold is recorded
with each sale
